A 17-month high in British consumer price inflation was reached in April, to the shock of economists.  Most had not expected interests rates to increase from their record slump of 0.5 percent before then.

This increase in inflation is in part due to temporary factors, including that the 2010 annual budget fell a month earlier than in 2009.  This brought forward annual increases in cigarettes and alcohol, which alone accounted for a third of the increase in the annual rate of consumer price inflation, between March and April.  A rise in prices for food and clothing also contributed around a third in the same period.

In reaction to this news, the pound rose briefly against the dollar before again slumping.  This, in addition to forthcoming budgetary cuts has prompted fears that the delicate recovery of the UK economy could be halted almost as soon as it begins.

Mervyn King, Governor of the Bank of England, said the return of VAT to 17.5 percent from its temporary reduction to 15 percent, higher oil prices and previous falls in sterling were hiking up prices.  However, he said that these were only short-term factors which would cease in the coming months.

Mr. King warned: "The temporary effects of these factors are masking the downward pressure on inflation from the substantial margin of spare capacity in the economy,"

Last month the central bank predicted any higher inflation to be transitory in nature, with any temporary factors to be outweighted by the current high unemployment and weak economic growth, which prevent firms and workers from raising wages and prices.

The central bank's forecast is that consumer price inflation should be back to its expected target by the end of 2010 or early next year.